Question

Eli, who lives in the UK, invested f4 million in Fizz, a U.S. company, trading at a market value of $100 per share. The conversion rate for pounds to dollars was £1 to $1.3 at the time of the investment. Assume that after two years, he sells the stock for $250 per. share when the conversion rate for pounds to dollars is £1 to $1.08. Eli's total return is closest to: Select onel

A. 150%
B. 200%.
C 225%
D. 250%.

Answer 1

Eli's total return on the investment is approximately 150%. Option (A) is correct.

Step-by-step explanation:

A portfolio investment is ownership of a stock, bond, or other financial asset with the expectation that it will earn a return or grow in value over time, or both. It entails passive or hands-off ownership of assets as opposed to direct investment, which would involve an active management role.

Eli's total return can be calculated by multiplying the initial investment by the rate of return. The initial investment was f4 million, which is equivalent to $5.2 million (f4 million * $1.3 per pound).

After two years, Eli sells the stock for $250 per share.

To calculate the total return, we need to find the number of shares Eli bought, which is f4 million divided by the market value of $100 per share, giving us 40,000 shares.

So, the total return is (40,000 shares * $250 per share) - $5.2 million = $10 million - $5.2 million = $4.8 million.

To calculate the percentage return, we divide the total return by the initial investment and multiply by 100: ($4.8 million / $5.2 million) * 100 = 150%.